Zappo's Case

Zappos.com is an online retailer who began selling shoes out of a house in San Francisco in 1999 and has grown to an online superstore with sales of over a billion. Their success is due to their commitment to customer service and their positive internal culture. To deliver the best possible service, they offer money back guaranteed returns and free shipping. Additionally, they will often upgrade orders to next-day delivery in order to impress and “Wow” the customer. In the beginning, Zappos.com operated on a “Drop-ship” model, it came out with issues of long delivery time and low service level. They solved these problems by stock their own inventory. However, the biggest challenge Zappos facing today is scheduling deliveries from its suppliers to the distribution center. Due to the limitation on visibility to manufacture’s supply chain, they were uncertain about the deliveries received every day during August. This leaded to traffic in the warehouse and relatively lower the customer service level. We recommend them having more part time workers at the warehouse during the peak season just to handle the receiving inventory. Increasing the communication with supplier is also necessary; if the supplier is able to inform about the delivery a few days in advance, the situation could be much better. In addition, the excessed inventory of the previous season also influences their operation. We think to separate the sales to two channels, Zappos and discounted outlets, are good idea. Furthermore, if Zappos is expanding into international market, large investment and cultural shock will be big issues.